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Money talks: Local authorities have made impressive efficiency gains but there are still savings to be made The Government's drive for efficiency is not new. Those who have been around the scene for a while will have sharp memories of the 3% efficiency targets of the Thatcher/Major era. But the current focus has come as a jolt because the generous spending settlements from 2000 onwards accustomed parts of the public sector to expect continuing real-term rises in public spending. However, as the chart below shows, the years of plenty were, historically, a blip. Labour and the Conservatives are embedding efficiency at the heart of their fiscal and public sector strategies, as they seek to contain public spending, keep down – or even reduce – levels of tax and create room for service improvements. Local authorities have done well to meet the government's target of making £3bn worth of efficiency savings on their 2004/05 baseline. But it is still just scratching the surface in some service areas. Audit Commission comparisons show that there is still considerable scope to cut costs in transactional and back-office services. Only one in five of councils, according to an independent survey published in January 2008, believes that is it using charging to its full potential. And a report from the Commission later this year will highlight the potential for big efficiency gains in waste management. So doing more of what we are already doing won't be enough to cope with the new efficiency agenda. We need some more radical solutions. First, efficiency is another reason to develop local governance. It is not just local authorities that are under the efficiency cosh – the health service, schools, colleges and the police are as well. Local strategic partnerships provide the framework for joint working, but the challenge is to use LSPs to work across organisational boundaries to deliver better value for money as well as improved outcomes. Local public sector agencies must do more to integrate management teams, merge management and back-office functions, co-locate services and share premises. Second, innovation and service transformation will be essential. While there is scope for continuing to make savings through improving traditional procurement the new efficiency agenda will require entrepreneurial managers who are open to entirely new ways of doing things. This will involve changing how councils work the private sector by developing dialogue with suppliers at an earlier stage in the competitive process. Too often the constraints of a pre-determined specification into which suppliers have had no input restrict them from submitting radical service options. Much of the service transformation will come from developing an in-depth understanding of customer lifestyles. Several councils now use detailed socio-economic, consumer and geographic data to plot who uses services, for what purpose and where do they live. They analyse the types of service people are either buying or accessing via the Internet in order to identify the scope for moving whole council functions and transactions online. It's taking traditional business process re-engineering disciplines, but using personal and consumer data to apply them at a more fundamental level. In some cases it may mean stopping doing some things entirely. Third, leadership is vital. Leadership creates the climate that improves performance. Making efficiency a driving and dominating political and cultural force in the life of an authority is the responsibility of those who lead it at both an executive and political level. Political debate about council budgets usually centres more on the adequacy of central government support than on the relative efficiency of authorities. In future the politics is more likely to focus on which party locally can establish itself as the champion of prudence. The challenge for local government is to move away from seeing efficiency as an imposed target from central government to it being part of the core business of how we operate in the public sector. Robert Hill is a former political secretary to ex Prime Minister Tony Blair and now works as an independent consultant. This article is an edited version of the introductory essay by Robert Hill to the June edition of the SOLACE Foundation Imprint series that has, as its theme, Efficiency as culture

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WHITEHALL

Get tougher on costs!

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